In January 2014, I was looking through our online bank statements to see what we were spending money on. The bank I used at the time, had an online money map that showed all the categories of how the money was spent. It had the typical categories such as food, utilities, insurance, etc. Then, there was the miscellaneous category…$2000!!! As I looked through what was in that category, I got angry, reallllly angry! But why? I was angered by all of the frivolous purchases we had been making. Purchases made without thought, rhyme or reason. Purchases simply made because the money was there. I started thinking, if we have $2000 a month to spend on needless items and going out to eat on a whim, then we had extra money to pay off our debt.
A little background…my husband and I had been married for 5 years at that time. Before getting married, I was well aware that my husband carried $80,000 in student loan debt. I entered the marriage with a credit card with a $13,650 balance, my husband had one with about $4500, a car loan of about $11,000 and a personal loan of around $2,000. It was a grand total of over $100,000!! For a while, I wasn’t really wanting to do anything abut the debt other than pay minimum payments on everything. I was afraid to see the total of what we actually owed so I avoided totalling it all up.
In the first 4 years of marriage, we managed to pay off the car, personal loan, the $4,500 loan and the credit card.We made progress, but the student loans of $80,000 was still staring us in the face (it was 4 different loans). The debt needed to go. We didn’t have a budget and still went shopping and ate out. So, we were not super serious about paying off the student loans or else we would have stopped all the extra spending.
By March 2016, we managed to pay off 3 of the smaller student loans. But we still had more debt! But, given the fact that we paid off so much, we got complacent knowing we only had one more to go. We were even about to buy another vehicle that was not necessary at the time. Thank God we didn’t! I had a gut feeling that it wasn’t a wise choice. It was around that time that I decided the debt had to go, once and for all.
November 2016 rolls around and I decided to do research on how to eliminate debt. I came across a name that has made a huge impact in the life of my family and our finances forever. Drum roll please…DAVE RAMSEY was the name of the person who inspired me to leave debt and never go back. I started learning about the 7 baby steps (http://www.daveramsey.com/baby-steps/?ectid=gaw.daveramsey-babysteps1). I got on board (and I say “I” because my husband was not interested in Dave Ramsey’s plan to get out of debt). But, I was quite determined that I did not want to live in debt any longer. Things were going to change and in a big way.
I began by selling a bunch of stuff!! I made a little over $1,000 in about a month and a half! How did I do this? Selling on eBay and Facebook. If you go on your smart phone, there is a little shop button on the top of the page on Facebook. There, you can list items for sale to people in your area. I prefer using this method to sell items for two reasons. One, its all local and no shipping is involved. Secondly, it was the place I had the best success. For some reason, I can’t sell anything on Craigslist in Oregon. So the Facebook method has been working out beautifully! So, boom, just like that, we accomplished baby step 1, saving $1,000 as our emergency fund.
The dreaded word of budget came into play. We had never really lived on a budget, so this was all new territory. Dave Ramsey teaches the envelope system. His daughter, Rachel Cruze uses a modern approach to the envelope system, same idea, just clips instead of envelopes (http://www.daveramsey.com/store/ramsey-personalities/rachel-cruze/new-wallet-clip-system-black/prodD0183.html?ectid=30.10.8323). Before living on a budget, it seemed like the money was already gone shortly after we were paid. After starting living on a budget, we were telling our money where to go before it even hit our account. We “gave every dollar a name” and told it where to go. Previously, I would go grocery shopping and just buy whatever I wanted. Now, I take cash and spend only that money. We use the envelopes for things that we tend to over spend on. For us it’s groceries and miscellaneous. Any extra money after 2 weeks, would go into our car fund. We do a bi-weekly budget since that is how my husband is paid. The next step Dave Ramsey teaches is pay off all debt, smallest to largest, regardless of the interest rate. This would be our student loan but since we are trying to save money for a second car so that I can drive our son to kindergarten in September, we started saving ASAP. I call this baby step 1.5. So, after starting the budget, we have saved $1,000 for our emergency fund and $3,000 to go towards the second car…all in just a month and a half! I estimate that we will have the money for the second car between April and June of this year. Then, on to paying off the student loan, can’t wait!
Stay tuned for more about our debt free journey!